NCB as defined in the procurement manual
NCB and ICB are modes of tendering in the public procurement process. However, these terms do not have proper legal definitions in any of the statutes. While there is no single, centrally established procurement law, the Manual for Procurement of Goods, 2024, issued by the Ministry of Finance on July 22, 2024, provides some guidance on procurement practices. According to this manual, the term NCB is referred to as Open Tender Enquiry (OTE).
Other manuals related to the Procurement of Consultancy, Non-Consultancy Services, and Procurement of Works have been derived in substance from this manual. Therefore, according to clause 1.3 of the procurement manual, in cases where specific guidance is not available in those manuals, the provisions of the procurement manual will apply mutatis mutandis.
Accordingly, it is to be noted that the relevant clauses as discussed herein in relation to NCB/OTE are not available in the Procurement of Works manual, therefore, the relevant sections of the Procurement of Goods manual have been referred to.
Under the OTE model, the Procurement of Goods manual prohibits the restriction of bidders and allows the participation of any and all bidders, including foreign bidders. Foreign bidders may participate if they are enjoined as a member of a consortium.
Extracts of the relevant portion:
- There should be no restriction on participation by prospective bidders who meet the eligibility criteria. Especially, prior registration with the Procuring Entity should not be insisted upon. However, bidders who are already registered are also free to participate.
- In the case of domestic open tender for projects (including turnkey projects), allowing consortium bidding, a foreign bidder can be a consortium member, subject to the condition that the consortium as a whole meets the minimum local content criteria, as per the Make in India Order, 2017. The leader of the consortium can be a foreign party, and the bids are to be solicited in Indian Rupee only, i.e., no payment can be made in foreign currency to the foreign consortium member.
Lack of a uniform legal framework across states
Despite the above provisions in the manual, it cannot be relied upon as it is not legally binding and does not have statutory effect. Therefore, to understand the precise meaning of NCB and ICB, it is necessary to examine state-specific procurement laws as well.
In India, only the states of Assam and Rajasthan explicitly define NCB and ICB in their procurement regulations. The other states do not mention these terms in their frameworks.
The Assam Public Procurement Rules, 2020, along with the FAQs published on the Assam government’s procurement portal, define NCB as a process in which only Indian bidders are eligible to participate.
Extract of the relevant portion:
“National Competitive Bidding” (NCB) means a bidding process in which qualified bidders within India only are allowed to participate;
Similarly, under the Rajasthan Transparency in Public Procurement Rules, 2013, the NCB process is restricted to Indian bidders only.
Extract of the relevant portion:
“national competitive bidding” means a bidding process in which qualified bidders only from within India are allowed to participate;
The definitions adopted in Assam and Rajasthan indicate that NCB is strictly for Indian bidders, whereas ICB is for foreign participation, as defined in the rules.
However, these definitions are not uniformly codified across all states wherein there exists a public procurement framework, leading to ambiguity in their interpretation.
The need for clarity in defining NCB and ICB
A clear distinction between NCB and ICB is essential for the following reasons:
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Interpreting tender documents:
The interpretation of Requests for Proposals (RFPs) that are titled “NCB” or “ICB” may become a litigious and ambiguous matter. In the absence of a clear statutory definition of these terms, the document is open for interpretation/challenge to determine the exact nature of the bidding process. If NCB/ICB is interpreted differently across states and public procurement frameworks, bidders may face difficulties regarding their eligibility, which may ultimately lead to legal disputes.
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Inconsistency in clauses:
In cases where an RFP does not explicitly specify whether the bidding process follows the NCB or ICB framework, and the clauses lack consistency in identifying whether foreign bidders can participate, it creates ambiguity and leaves room for interpretation.
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Inconsistency in statutes:
The codification of NCB and ICB definitions in only two states, which contradicts the procurement manual, creates significant confusion. Stakeholders in those states will follow their respective Acts, while others may adhere to the manual. This disparity becomes particularly problematic in cross-jurisdictional bidding.
A bidder from Assam or Rajasthan may assume that their interpretation will apply to other states, leading to possible incorrect assumptions about eligibility or procedural requirements in situations where the states deviate.
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Administrative inconsistencies:
The procurement officials may also interpret eligibility and process rules differently to the bidders and other stakeholders, due to the framework within the respective jurisdiction or confusion regarding the interpretation of the two terms i.e., NCB and ICB. This can result in inconsistent evaluation, further complicating the process for bidders and increasing the scope for errors.
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Deterrent to international participation:
Ambiguity regarding whether a process is NCB or ICB, i.e., whether foreign participation is allowed, may deter international bidders. This limits competition, possibly affecting the quality and cost-efficiency of procurement outcomes.
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Inconsistencies in bidder eligibility requirements:
A majority of the RFPs contain a clause specifying that a bidder must be an entity incorporated or registered in India under the relevant Acts. A standard eligibility clause found in RFPs states as follows:
Extract of the relevant portion:
“The Bidder may be a company incorporated under the Companies Act, 1956/2013, a partnership firm registered under the Indian Partnership Act, 1932, or a Limited Liability Partnership (LLP) incorporated under the LLP Act, 2008.”
Additionally, most RFPs define the word “Bidder” to include not only a single bidder but also members of a consortium:
Extract of the relevant portion:
“The ‘Bidder,’ which expression shall, unless repugnant to the context, include the Members of the Consortium.”
This definition states that each member of a consortium is considered to be a Bidder under the RFP. Therefore, each member of the consortium is required to be registered under the relevant laws, as seen above.
This poses an inconsistency as detailed below.
Resolving the ambiguity
If a foreign bidder is permitted to participate as part of a consortium but is still required to be registered or incorporated in India, it creates a contradiction. The RFP document takes precedence over the procurement manual or public procurement laws in the state, meaning that the eligibility clauses in the RFP will ultimately determine whether foreign bidders can participate or not.
Therefore, the contradictory and ambiguous nature of the clauses needs to be addressed. This ambiguity and contradiction arise due to the lack of clarity on the nature of bidding for the RFP.
It may be argued that if an RFP explicitly prohibits foreign participation or has no provision for foreign participation, then only Indian bidders will participate, making the distinction between NCB and ICB irrelevant. However, the absence of a consistent legal definition across India nevertheless provides leeway for confusion to arise, as seen above, especially in documents wherein a contradictory or favourable provision for the participation of foreign bidders is not expressly provided.
Way forward
On the basis of the above and general practice, the following is recommended:
- NCB and ICB should be codified in the respective state procurement Acts and rules, with NCB being explicitly defined as a process in which foreign bidders are not permitted to participate, and ICB being reserved solely for foreign bidders. These definitions should also be incorporated into the national procurement manual to ensure consistency.
- In case foreign participation is to be allowed under NCB through consortium arrangements, clear and comprehensive guidelines should be established for the same. Additionally, the procurement rules in Assam and Rajasthan should be modified to align with these guidelines, ensuring uniformity and consistency in interpretation, and similar legislations shall be brought in in all other states regarding the application of NCB and ICB to ensure uniformity in the bidding process.
Conclusion
In conclusion, the distinctions between NCB and ICB play a critical role in shaping India’s procurement landscape, especially when the country is poised for growth in the infrastructure sector. The lack of uniformity in definitions across various states and the lack of procurement frameworks have led to ambiguity, particularly concerning the eligibility of foreign bidders. To address this, it is imperative to establish clear and consistent statutory definitions for NCB and ICB in line with existing practices, such as those found in Assam and Rajasthan. By codifying these definitions into national procurement rules and aligning them with the procurement manual, India can streamline its bidding processes, ensuring transparency, greater clarity, consistency, and fairness for all stakeholders involved.
A clear definition of NCB and ICB under the respective states as in the case of the State of Assam and the State of Rajasthan will not only enhance legal certainty but also avoid any interpretational issues raising legal disputes and will also facilitate more efficient and transparent procurement, fostering a competitive environment that enables both domestic and international bidders to participate in the bidding, wherever applicable.